Government Shutdown & Default Fears Affect SF Homes Market
Paragon Real Estate Report, November 2013
The number of home listings accepting offers was way down in October (when it usually goes up); months-supply-of-inventory was significantly up (when it usually goes down in October); average days on market were still very low; median sales price was generally stable: The San Francisco real estate market is currently delivering a wide variety of signals, some of them undoubtedly influenced by the U.S. government shutdown fiasco, which dominated the first 3 weeks of last month.
Percentage of Listings Accepting Offers
October is usually one of the busiest months of the year for buyers purchasing new homes – as measured by having their offers accepted – as they react to the surge of new listings that typically arrives after Labor Day. But the government shutdown and the threat of U.S. default hammered October’s activity as SF buyers nervously waited to see how it was going to shake out. Surveys show that the affluent were the group most concerned about a possible default – and SF is a very affluent home-buying market. In this chart, the plunge in the percentage of listings accepting offers is well illustrated; and on a unit basis, the number of homes accepting offers dropped by about 20% year over year, a big decline. Closed sales were actually up about 7%, but October closings reflect accepted offer activity in August/ September before the shutdown crisis began. It is too early to tell if there is more going on in the market besides the temporary reaction to default fears.
This chart on Months Supply of Inventory shows a similarly unusual trend for October: MSI going up from September instead of down. Though it’s well up from recent months, it’s still low by market standards.
Months Supply of Inventory
Average Days on Market
Although many fewer listings went into contract (i.e. accepted offers) in October compared to last year, those homes that did accept offers did so, on average, very quickly. That, of course, is usually an indication of a hot market. So buyers didn’t snap up as many listings – either as a percentage of listings or in units – but the ones they did, were snapped up very quickly. Sometimes different statistics appear to indicate different trends on a short-term basis; such anomalies are almost always resolved over a longer term.
Case-Shiller Home Price Index
The last Case-Shiller Index reading – for the 5-county “SF Metro Area” – came out in late October for the month of August, and it’s a 3-month moving average, so the Index really reflects the market 3 to 5 months ago. This chart gives an overview of long-term trends in Bay Area values for homes in the upper third of sales by price range (i.e. more expensive homes). If we looked at what was happening month by month in the Index, we’d see a gradual plateauing of price appreciation of higher-priced homes over the past few months after the furious increases of spring. Home values in the city of San Francisco itself (as opposed to the Metro Area) are now generally above the previous peak values in 2006-2008.
Paragon Case-Shiller Report
Median Sales Price Appreciation
This chart tracks SF home median price appreciation since the market recovery began in earnest. The overall trend has been dramatically up, but median prices for the last 5 months have been relatively flat after the springtime spike. If the October slowdown in accepted offers had any effect on median prices, it won’t show up until November and December closed sales are tallied. The market has certainly shifted from the frenzy of the first half of the year, but, except for October (affected by default fears), statistical measures of supply and demand have generally continued to show a strong market by historical measures. If a significant shift is occurring in the market, it will become clearer in the statistics of upcoming months. Note that median price changes are not perfectly correlated to changes in home value, as they can be affected by issues such as seasonality and inventory.
Mortgage Interest Rates
In good news for buyers and sellers, 30-year interest rates have been dropping and are now at their lowest since June (though still above the historic low reached earlier in the year).
Home Values around the Bay Area
We just updated our Bay Area Home Value map, which provides an interesting look at comparative home prices around the bay. Remember that each median price delineated for a particular city disguises a huge variety of prices in the underlying sales. For example, in San Francisco, median house sales prices by neighborhood vary from under $500,000 to over $4,000,000. Other towns and cities will have a similarly wide range in property values underlying their overall median sales prices.
San Francisco Neighborhood Values
San Francisco Median Home Sales Prices
It’s not unusual for median prices to fall in the first and third quarters (affected by winter and summer holidays) and rise in the second and fourth quarters (prime spring and autumn selling seasons). This is what happened in this past third quarter and it typically has more to do with seasonal factors than changes in market values. One has to look at the longer term trend, not monthly or quarterly fluctuations, to determine what’s really happening in the market. For the last 6 quarters, the overall trend in home prices has been upward.
3rd Quarter Home Sales Snapshot
These statistics for the third quarter indicate a market that is still extraordinarily strong by any historical measure: 87% of home sales sold quickly without price reductions, at an average of almost 8% over asking price. It did cool down somewhat from our insanely frenzied spring season, but part of that is explained by the typical summer slowdown dynamic. How the market performs in the next two months will tell us a lot about whether the market is settling down, transitioning to a new phase or continuing to race along in high gear.
San Francisco Neighborhood Home Values
We’ve updated our home-value maps to reflect sales for the past 5 months: The city is reaching some very high points in median sales prices and average dollar per square foot values. This map is for San Francisco house values and this link goes to our new interactive map for both house and condo values:
Home Price Appreciation vs. Inflation since 1988
Inflation over the past 25 years has been relatively slow and steady, while home prices have gone up and down dramatically according to the market cycle. But since 1988, home value appreciation in the Bay Area has generally exceeded CPI inflation by a significant amount, which is good news for homeowners. If you’d like to read our complete report on home prices, inflation, leverage and home equity, you can find it here:
SF Luxury Home Sales
One of the classic seasonal trends in real estate is the decline in the number of luxury home sales in the first and third quarters, because the higher end of the market has a greater tendency to check out for the holiday seasons. This is a major factor behind the typical decline in median sales prices during these periods, as referred to above. Though luxury property sales were far above recent years, this decline in unit sales occurred in this past quarter as well. If market conditions and seasonal trends hold true, we should see a big uptick in luxury home sales in the new quarter just begun.
Comparing Bay Area County Markets
In September, we completed a report comparing the different real estate markets in the counties around the San Francisco Bay Area. If you would like to read it in its entirety, you can find it here:
Inventory of Homes for Sale
September did see a spike in the number of home listings for sale in San Francisco, but not as big an increase as we had hoped for. read more →
30 Years of Housing Market Cycles in San Francisco
Updated Report, September 21, 2013
Below is a look at the past 30 years of San Francisco Bay Area real estate boom and bust cycles. Financial-market cycles have been around for hundreds of years, all the way back to the Dutch tulip mania of the 1600′s. While future cycles will vary in their details, the causes, effects and trend lines are often quite similar. Looking at cycles gives us more context to how the market works over time and where it may be going — much more than dwelling in the immediacy of the present with excitable pronouncements of “The market’s crashing and won’t recover in our lifetimes!” or “The market’s crazy hot and the only place it can go is up!”
1982 – 2013: A Simplified Overview
Up, Down, Flat, Up, Down, Flat…(Repeat)
Smoothing out the bumps delivers this overview for the past 30 years. Whatever the phase of the cycle, up or down, while it’s going on people think it will last forever: Every time the market crashes, the consensus becomes that real estate won’t recover for decades. But the economy mends, the population grows, people start families, inflation builds up over the years, and repressed demand of those who want to own their own homes builds up. In the early eighties, mid-nineties and in 2012, after about 4 years of a recessionary housing market, this repressed demand jumps back in (or “explodes” might be a good description) and prices start to rise again. It’s not unusual for a big surge in values to occur in the first couple years after a recovery begins.
Surprisingly consistent: Over the past 30+ years, the period between a recovery beginning and a bubble popping has run approximately 6 years. We are currently something less than 2 years into the current recovery. Periods of market recession/doldrums following the popping of a bubble have typically lasted about 4 to 5 years. Generally speaking, within about 2 years of a new recovery commencing, previous peak values (i.e. those at the height of the previous bubble) are re-attained — among other reasons, there is the recapture of inflation during the doldrums years. In this current recovery, those homes hit hardest by the subprime loan crisis — typically housing at the lowest end of the price scale in the less affluent neighborhoods, which experienced by far the biggest bubble and biggest crash — may take significantly longer to re-attain peak values, but higher priced homes are already doing so.
This does not mean that these recently recurring time periods necessarily reflect some natural law in housing market cycles, or that they can be relied upon to predict the future.
Mortgage Interest Rates since 1981
It’s much harder to decipher any cycles in 30-year mortgage rates over the same period. Despite the rate spike over the summer, rates remain very low by any historical measure, and this, of course, plays a huge role in the ongoing cost of homeownership.
In the 2 charts below tracking the S&P Case-Shiller Home Price Index for the 5-County San Francisco Metro Area, the data points refer to home values as a percentage of those in January 2000. January 2000 equals 100 on the trend line: 66 means prices were 66% of those in January 2000; 175 signifies prices 75% higher.
1983 through 1995
(After Recession) Boom, Decline, Doldrums
In the above chart, the country is just coming out of the late seventies, early eighties recession – huge inflation, stagnant economy (“stagflation”) and incredibly high interest rates (hitting 18%). As the economy recovered, the housing market started to appreciate and this surge in values began to accelerate deeper into the decade. Over 6 years, the market appreciated almost 100%. Finally, the eighties version of irrational exuberance — junk bonds, stock market swindles, the Savings & Loan implosion, as well as the late 1989 earthquake here in the Bay Area — ended the party.
Recession arrived, home prices sank, sales activity plunged and the market stayed basically flat for 4 to 5 years. Still, even after the decline, home values were 70% higher than when the boom began in 1984.
1996 to Present
(After Recession) Boom, Bubble, Crash, Doldrums, Recovery
This next cycle looks similar but elongated. In 1996, after years of recession, the market suddenly took off and became frenzied — actually quite similar to what we’re experiencing today. The dotcom bubble pop and September 2001 attacks created a market hiccup, but then the subprime and refinance insanity, degraded loan underwriting standards, mortgage securitization, and claims that real estate never declines, super-charged a housing bubble. Overall, from 1996 to 2006/2008, the market went through an astounding period of appreciation. (Different areas hit peak values at times from 2006 to early 2008.) The air started to go out of some markets in 2007, but in September 2008 came the market crash.
Across the country, home values fell 15% to 60%, peak to bottom, depending on the area and how badly it was affected by foreclosures — most of San Francisco got off comparatively lightly with declines in the 15% to 25% range. The least affluent areas got hammered hardest by distressed sales and price declines; the most affluent were typically least affected. Then the market stayed flat for about 4 years, albeit with a few short-term fluctuations. Supply and demand dynamics began to change in mid-2011, leading to the market recovery of 2012.
San Francisco from 2010 to 2013
A Strong Recovery
In 2011, San Francisco began to show signs of perking up. An improving economy and growing buyer demand coupled with a low inventory of listings began to put upward pressure on prices. In 2012, as in 1996, the market abruptly grew frenzied with competitive bidding. The city’s affluent neighborhoods led the recovery, and those considered particularly desirable by newly wealthy, high-tech workers showed the largest gains. However, virtually the entire city soon followed to experience similar rapid price appreciation.
San Francisco median home sales prices increased dramatically in 2012 and then accelerated further in the first half of 2013. (Note that third quarter figures will probably show a typical seasonal decline from second quarter median prices. There are also seasonal cycles in real estate.) By all appearances, San Francisco and the Bay Area are in the midst of a healthy recovery. Among other positive signs, new home construction is soaring.
All data from sources deemed reliable, but may contain errors and is subject to revision. Copyright 2013 Paragon Real Estate Group.
Is the market flattening out after its huge appreciation surge since 2012 began, or will the autumn sales season bring another step of renewed price increases?
Right now, there are some mixed signals regarding what is occurring in the San Francisco market: spring’s big jump in values vs. the recent plateau in median sales prices; interest rates that have increased significantly, but are still extremely low by historical measures; growing signs of buyer burnout with frenzied market conditions vs. supply and demand statistics that still indicate a very strong sellers’ market; and an increasing number of expired listings, which suggests that sellers may now be pushing their asking prices too high for buyers to swallow.
Seasonality plays a significant role in median sales prices rising in spring and autumn, and declining in summer and winter – as discussed below, much of this pertains to ebbs and flows in the luxury home market and does not necessarily reflect changes in home values. With real estate statistics, the longer-term trend is what is meaningful, not short-term fluctuations up and down. Looking at the chart above, the median sales price jogs up and down for a variety of reasons, including seasonality, but stepping back, one sees the strong, ongoing appreciation since the market recovery began.
September is typically the month with the highest number of new listings hitting the market: how buyers respond will determine what the next stage of the market will look like.
The Luxury Home Market, Seasonality & Median Sales Prices
The big surge in accepted offers for higher-price homes occurs in April/May and September/ October, when these sales make up about 14% of total home sales. The big slump in luxury home sales occurs in the summer months and in December/January, when their percentage of total sales declines to about 10%: more so that the general market, the luxury segment checks out during the summer and winter holidays. This significant decline in the ratio of high-price sales to total sales is one factor that reduces overall median home sales prices during the summer and winter holiday months.
Inventory of Homes for Sale
This chart tracks the overall decline in inventory available on any given day since the market recovery began. However, despite the huge decline in listings for sale on any day, the number of MLS home sales in 2013 YTD is actually a tad higher than the same period of 2012, and 16% higher than in 2011. Because a much higher percentage of listings are selling, and selling much more quickly than before. If sellers start re-entering the market in larger numbers, the quantity of sales should jump sharply higher as well – and may stabilize home price appreciation.
New Listings Coming on Market
September is typically the single month of the year when the largest number of new listings comes on market. This chart illustrates the ebb and flow of new inventory by season. We shall see if this September brings the big surge in new home listings that buyers are hoping for.
This link’s chart tracks Months Supply of Inventory: It continues to indicate a market defined by very high demand when compared to the supply of inventory available to buy:
Months Supply of Inventory
Expired and Withdrawn Listings
The main reason for expired and withdrawn listings is that buyers ignored them as overpriced. The fact that the number of these listings has been climbing dramatically of late means that sellers are either pushing the envelope on prices or buyers are pushing back at the price points recently achieved during the height of the market frenzy – or both.
This chart indicates some of the mixed signals we’re seeing: on one hand, 87% of sales sold quickly without price reductions at an average sales price 8% over list price (i.e. an extremely hot market). On the other hand, the number of listings expiring or being withdrawn is climbing and so is the number of listings that has been on the market for 2 months or longer without accepting offers. Note the large difference between average days on market between homes that sell without price reductions (31 days) and homes that must be reduced before they sell (88 days): pricing, preparing and marketing properly is vital in any market.
Mortgage Interest Rates
Rates have been more or less stable since their big percentage jump in June. The increase in loan rates from their low point in 2013 is large as a percentage increase, but still leaves current rates very low from a historical perspective. The consensus of pundits seems to be that rates will be going significantly higher when and as the Fed begins tapering their huge bond-purchase program, but predicting interest rate changes is a tough game.
1920 to Present
A companion to our recent overview on San Francisco Victorian and Edwardian architecture (Early SF Architecture): the text, chart and photos used herein are all courtesy and permission of the San Francisco architect James Dixon: James Dixon Website. We are most grateful for his generosity in allowing us to use them.
Art Deco: 1920 – 1940
Art Deco takes its name from the International Exposition of Modern Decorative and Industrial Arts held in Paris in 1925. This new style rejected aristocracy for democracy, frugality for luxury, and European architectural references for futuristic geometric ornament. It is a decorative style of applied ornamentation, and its features include geometric ornament of zigzags, chevrons, sunbursts, and florals; and use of exotic architectural references, such as of Mayan temples and ancient Egypt.
International Style: 1925 – Present
Mies van der Rohe’s maxim “Less is more” appropriately expresses this lean and functional style. Mies was one of three gifted architects who learned functional design from the industrial architect Peter Behrens; the other two were Le Corbusier and Walter Gropius. In 1923 Corbusier published “Towards an Architecture”. It set modern engineering and unadorned honesty, pure function and pure form, as the only true standards of architecture. Corbusier’s most famous dictum, “A house is a machine for living” still influences architects today. Characteristics include no ornamentation, windows flush with walls, no trim on doors or windows, functionally efficient open floor plan and flat roof.
Streamline Moderne: 1930 – 1950
Art Deco was a transport to another time-an exuberant fantasy future or an exotic past-while Streamline Moderne was a transport to another place. It was a romance of efficient travel by ocean liner, airplane, train and car. This new science of aerodynamics rounded edges, assisted air flow around corners with horizontal grooves, and smoothed surfaces so they were unencumbered and sleek. Buildings became romantic ships and airplanes to and from another place. Characteristics include curved corners; the use of glass block; corner and porthole windows; and other elements of nautical or aerodynamic flair.
Bay Area Modernism, Second Style: 1930 – 1960
Bay Area Modernism influenced more homes throughout America than all other architectural styles combined, as seen in the vast tracts of post-World War II suburban ranch houses. Architect William Wurster combined a love of California landscapes and its rural buildings (wood-sheathed farmhouses, barns and sheds) with the elemental quality of minimalist Japanese architecture. The goal was inexpensive homes that allowed the outside in and were easily built of local, natural materials.
Bay Area Modernism, Third Style: 1950 – 1980
As the Second Bay Area Style matured, architects tired of its plainness and flirted with playful pop culture and Postmodernism. They started the Third Bay Area Style and influenced acres of tract homes throughout the United States.
Eichler Homes: 1950 – 1970
Joseph Eichler was a visionary developer who built over 11,000 homes in California. All his homes would display Frank Lloyd Wright’s core ideas: “breaking the box”, “bringing the outside in”, floor to ceiling glass, simple natural materials kept exposed, and the open floor plan. These ideas made Eichler homes airy and modern.
Post-Modernism, 1960 – 2000
To Mies van der Rohe’s modernist maxim “less is more” architect Robert Venturi famously riposted “Less is a bore.” Venturi’s 1966 book “Complexity and Contradiction in Architecture” rejected International Style modernism and, at its best, freed architects to borrow freely across architectural styles. At its worst it allowed fake historical ornament pasted to boring boxes and intentionally jarring juxtapositions of different architectural styles.
New Modernism, 1980 – Present
These buildings use modern materials, technology and computer modeling, yet strive to be humane – a radical concept in modern architecture that up to this point had revered machines, not humanity, and had rejected nature, not embraced it. Humane Modernism’s aesthetic is contemporary, but it is warm, tactile, colorful and durable. It uses the best traditional building methods to increase the everyday quality of life of the inhabitant-such as local sustainable materials beautifully detailed and exposed to view, as well as the common incorporation of “green building” features.
SF Modern Architecture Timeline
Here is a nifty timeline of San Francisco’s variety of modern architectural styles.
This link goes to architect James Dixon’s complete overview, which was the basis for this article. It features short videos on each of the architectural styles mentioned above. Also included is a link to his overview of Victorian and Edwardian styles of San Francisco architecture:
And for those who find San Francisco history as interesting as we do, here are two other websites we’ve discovered filled with fascinating stories and photographs:
Percentage Changes since 2006-2008 Peak of Market
Range from 25% Below to 25% Above Previous Peak Values
August 2013 Market Report
This heat map compares 2013 2nd quarter or 1st half median home sales prices – for houses, condos, co-ops and TICs combined – with those at the peak value time prior to the recent market recovery. Previous peak value times vary by neighborhood: typically, the least affluent neighborhoods hit peak prices in 2006 and also fell the most, percentage-wise, during the crash, falling 25% to 50%. These neighborhoods were most affected by the subprime and distressed-property sales crises. The mid-affluent neighborhoods peaked in 2007, and usually declined in value in the 20% to 25% range. And the most affluent areas reached peak values last, in the first half of 2008 prior to the September 2008 crash: Their fall in value ranged approximately 15% to 20% from 2008 peak to 2010-2011 nadir.
Generally speaking, when the market began to turn around in late 2011/early 2012, the last neighborhoods to fall were the first to recover, followed by the mid-affluent and then the less affluent areas. This link goes to our full report and an explanation of the analysis:
Heat Map Report
All-Cash Home Sales
All-cash buyers come in three main categories: the first group consists of investors buying foreclosed-upon properties, often during trust-deed auctions on the “courthouse steps.” The Blackrock Group alone has purchased over 20,000 distressed homes across the country, which they usually fix up and rent out. Other investors buy, fix up and re-sell, or just buy, wait and flip (as the market recovers). The second category of all-cash buyers consists of people who always purchase their homes without financing: These often very affluent buyers have always been around to one extent or another. And the last category of all-cash buyers are those who prefer to finance their home purchases but have enough cash available to buy without financing: In the hope of winning in a competitive bidding situation, they make all-cash offers in order to appeal to sellers. This link goes to our full report:
Homes With and Without Parking
The vast majority of San Francisco home sales include at least one on-site parking space in the sale, and 80% – 90% of buyers put parking on their must-have list when searching for a new home. That doesn’t mean that a home without parking cannot sell at a good price, but it does mean that on average it will take somewhat longer to sell, as well as selling at a lesser price than a comparable home with parking. It’s difficult to calculate the exact value differential between homes with and without on-site parking for a number of reasons. This link goes to our full report:
The Value of Parking
Renting vs. Buying in San Francisco
We’ve updated two analyses regarding the financials of renting vs. buying in San Francisco. This is the first part of our calculations regarding 2-bedroom units, comparing the median condo sales price with the average apartment asking rent. (We also did one for 3-bedroom houses.) These calculations depend to a large degree on one’s financial assumptions and projections. For our complete analysis:
Rent vs. Buy – 2-Bedroom
Largest SF Home Sales YTD
Looking at SF home sales reported to MLS by July 31, this chart shows the largest sales by neighborhood for properties selling for $3,500,000 or more. This link goes to our chart on sales below $3.5m:
Largest Home Sales, Chart 2
Victorian & Edwardian Architecture in San Francisco
In case you missed our recent article using information and photos by SF architect James Dixon, here is a fascinating timeline and this link goes to the complete, well-illustrated article on the different Victorian and Edwardian architectural home styles prevalent in the city:
San Francisco Transportation Report
We recently stumbled across the annual report of the city’s Municipal Transportation Agency (MTA) and charted some of its most interesting facts. This chart illustrates the (staggering) number of citations issued by violation, and this link goes to all 5 of our charts:
SF MTA Report
An Illustrated Overview
One of the great charms of San Francisco is the wonderful variety of architectural styles that grace our streets – it’s not unusual to see half dozen distinct types of architecture on a single block. Here is a brief overview of the Victorian and Edwardian eras of home architecture with which the city is perhaps most identified – though, of course, many beautiful homes and buildings have been built since that era, and continue to be built.
The text, chart and photos are all courtesy and permission of the San Francisco architect James Dixon: James Dixon Website. We are most grateful for his generosity in allowing us to use them.
This is a fascinating timeline of the different styles of architecture that will be discussed in this piece, created by Architect James Dixon. It can be a little difficult to read, but is easier to decipher if you adjust your screen-view zoom larger. It can also be found online at James Dixon’s website.
Gothic Revival: 1840 – 1890
The publication of Cottage Residences by Andrew Jackson Downing in 1842 became the spur for the Gothic Revival style in America. The residential offshoot, called Carpenter Gothic, used wood rather than stone and eschewed gargoyles and stained glass in favor of simpler ornament. Although some of the more extravagant homes may qualify as Gothic Revival, most can safely be called Carpenter Gothic. Characteristics of this style include pointed arches over doors and windows; steeply pitched roofs: turrets, pinnacles, crenellations; and leaded glass windows.
Victorian Italianate: 1850 – 1890
In 1850, Andrew Jackson Downing published The Architecture of Country Houses. which popularized a new style: Italianate. The house at 807 Franklin is an elaborate example of the style, exhibiting many of the hallmark characteristics: quions along the edges; tall, narrow windows with rounded tops, porch portico, a slanted bay window, classical columns and pilasters, as well as the look of a building that should be made out of stone.
Victorian Stick: 1860 – 1890
These houses have long, thin pieces of wood, called “sticks,” applied to their surface, especially at corners. These sticks are meant to be both decorative and expressive of the underlying wood framed structure. In the 1870s these decorative elements became exceedingly numerous and elaborate. Homes in this new vein were called Stick Eastlake, which is actually a misnomer since Charles Eastlake, from whom the name derives, abhorred excessive ornamentation. San Francisco has the greatest concentration of Stick and Stick Eastlake style homes in the world.
Queen Anne: 1880 – 1910
The Queen Anne style came after many Victorian styles and it is not uncommon to see elements of preceding styles in one house. Two things make it easy to identify a Queen Anne: plasticity (“in-ness and out-ness”) and a continuous gable roof that is expressed at the street. Some houses that began as Italianate or Stick became Queen Anne after a remodel, and there are also some that are all three styles at once. The Victorians dreaded the vacant surface, everything was decorated. Characteristics include multi-textured facade; steeply pitched roof with gable front; conical, corner tower; cutaway bay windows; bands of ornament; and stained glass
Arts & Crafts: 1890 – 1910
Inspired by John Ruskin and William Morris, the Arts & Crafts movement started in England in the 1860s and started to influence American architecture around 1890. The movement advocated the use of locally sourced natural materials, pride in craftsmanship, and emulation of medieval design. Common characteristics include doorways and windows dressed with stone and brick; projecting eaves; intricate joinery; leaded-glass windows and square chimneys; Gothic ornaments and Tudor half-timbering
Shingle: 1880 – 1910
Ubiquitous shingle cladding is the defining feature of the Shingle Style. These houses vary widely in composition and historical affiliation, but are still readily identifiable as Shingle style. They minimized decorative elements due to the influence of the Arts and Crafts Style and aimed for informality and rusticity. These homes are a reaction to the design excesses of the Victorian period. San Francisco has many excellent examples of the Shingle style by some the best architects of that time: Bernard Maybeck, Ernest Coxhead, Julia Morgan, Willis Polk.
Tudor Revival: 1890 – 1940
Evocative of country homes from medieval England, Tudor Revival houses stand out in the urban context of San Francisco. This style is based on the principles of the Arts and Crafts movement, which advocated a return to medieval building types and design. Characteristics include steeply pitched roof; decorative half-timbering; prominent cross-gables; mix of brick or stone with stucco or wood; and grouped, leaded windows with small panes.
Another Example of Tudor Revival
Mission Revival: 1890 – 1920
All you need to do to identify a building in this style is look up. They always have a Mission-shaped parapet or window dormer, from which the name of the style derives. Although the Mission Revival style began around 1890, it did not become common until the start of the Edwardian period. San Francisco is no exception to the rule. Most of the Mission Revival homes and buildings were built after 1901.
Edwardian Craftsman: 1900 – 1930
In 1901, Gustav Stickley started a magazine called The Craftsman, for which the style is named. The magazine and some pioneering works by the Greene brothers quickly spread the style around the nation. Both Stickley and the Greene brothers were heavily influenced by the English Arts & Crafts movement. Craftsman homes tend to emphasize the horizontal, as in the bands of windows on the facades of these SF houses. Other characteristics include the use of native, natural construction materials; projecting eaves and exposed rafter ends; and casement windows, often with art glass.
Spanish Eclectic & Revival
Spanish Revival homes look like they belong in Spain, while Spanish Colonial buildings are less refined and look like they belong in a Spanish colony. These homes freely mix elements of Spanish Revival, Spanish Colonial, and Mission Revival. Mediterranean Revival is another freely-mixed style that was popular with San Francisco builders. Thousands of Spanish Eclectic and Mediterranean Revival homes were built in the Marina District and Sunset. Characteristics include a low-pitched roof with little or no overhang; red roof tile; arches over front door and most prominent window; stucco walls; and the large bow front window over a garage.
This link goes to architect James Dixon’s complete overview, which was the basis for this article. It features short videos on each of the different Victorian and Edwardian styles mentioned above. Also included is a link to his overview of subsequent styles of San Francisco architecture:
And for those who find San Francisco history as interesting as we do, here are two other websites we’ve discovered filled with fascinating stories and photographs:
July 2013 San Francisco Market Report
If you prefer, you can skip the following analysis to go straight to the charts and maps following.
Many adjectives are used to describe San Francisco, but normal isn’t a common one – and the same can be said about our real estate market. Even taking into account its tendency to be unusual in one way or another, this past spring’s market was overheated by virtually any definition. Surging consumer confidence and huge buyer demand chased a deeply inadequate supply of homes for sale, abetted by interest rates so low that loans – factoring in inflation and mortgage interest deduction – were almost like free money. All this led to an extreme seller’s market, a feeding frenzy and dramatic price appreciation.
But not, in our opinion, a bubble. The Economist, one of the first to sound the alarm for the last bubble, sees no sign of a U.S. housing bubble, basing its conclusion upon historical comparisons of home prices with rents and incomes. Also, it is not unusual for the market to go somewhat crazy following a 4-5 year down cycle after all the repressed demand bursts forth – this happened in 1996-1997 too. Besides which, we are only about 18 months into the current recovery. Though real estate is susceptible to sudden economic and political shocks, in past cycles, recoveries have typically lasted at least 6-8 years before peaking. That doesn’t mean there won’t be any short-term market adjustments, up or down, for one reason or another, along the way.
There are some signs of a normalizing market. After a year of declines, the number of new listings in the 2nd quarter was a little higher than the 2nd quarter of 2012. Though this inventory was quickly gobbled up and overall supply remains very low, it’s a good sign more sellers are entering the market. Median prices may be leveling off after spring’s big pop – it’s still too soon to be sure, but summer often sees a cooling down. It’s not welcome news to buyers, but interest rates have increased from extreme lows – though remaining very low by any historical scale. (See below: The Sky is Not Falling.) The distressed home segment, which always distorts markets, is disappearing in the city and declining everywhere. And new-home construction continues to increase: even though we won’t see much of this new inventory until 2014 and later, it’s a very positive sign.
We have updated our home value maps to reflect spring’s recent sales:
San Francisco Neighborhood Values
San Francisco Median Home Prices
For both houses and condos, the second quarter saw jumps well above previous peak values. Median sales prices are affected by other factors besides changes in value – seasonality, inventory, buyer profile, big changes in the distressed and luxury home segments – but the dramatic increases do reflect rapidly climbing home values in the city. Though all SF neighborhoods have been experiencing striking appreciation, this does not mean that all have now exceeded previous peak values.
Sales Over & Under Asking Price
This chart illustrates the enormous percentage of listings selling for over – and sometimes far over – asking price. 25% of house sales in June sold for 20% or more above list price: At San Francisco prices, 20% above asking often equals hundreds of thousands of dollars.
Price reductions: 89% of second quarter sales sold quickly without price reductions at an overall average of 8% over list price – a clear indication of overheating. Still, not every listing sold without a price reduction and some didn’t sell at all, but ended up withdrawn from the market:
Price Reduction Chart
San Francisco Luxury Home Sales
No market segment has been affected more dramatically by the recovery than luxury homes. In an inventory constrained environment, it has far out-performed the general market in unit sales.
This link goes to our luxury market report that also delineates the neighborhoods which dominate high-end house and condo sales in San Francisco:
Paragon Luxury Report
Interest Rates: The Sky Is Not Falling
Not to diminish legitimate concerns regarding rising mortgage rates and their effects on housing costs, but this graph puts recent increases in context. At any time before 2011, the current interest rates, even after their recent big percentage jump, would be reason for conga lines of celebration in the streets. Rates had to rise from their historic and artificial lows – how far and fast this may continue is unknown to us, but we don’t presently expect big shocks to the real estate market in the near future.
Distressed Home Sales: this link goes to a chart illustrating the rapidly dwindling distressed home market in San Francisco. In most neighborhoods, the effect of these sales has disappeared altogether.
Distressed Home Sales
Average Days on Market (DOM) have also hit historic lows for virtually every property type in the city:
Average Days on Market
Multiple SF Neighborhoods Reach Median Home Prices Exceeding $2,000,000
and/or Average Dollar per Square Foot Values above $1000
San Francisco Home Value Maps, Updated June 30, 2013
The San Francisco 5-county metro area had the biggest gain in home
prices among the 20 largest national metro areas according to the
April S&P/Case-Shiller Index released on June 25th, increasing 24%
year over year. We expect to see another bump in May’s Index
reflecting the acceleration in home price appreciation that began to
show up in March. By itself, San Francisco is the only county in the
state to exceed previous peak values set in 2006-2008, according to
Leslie Appleton-Young, chief economist for the California Association
of Realtors. It should be noted however that this does not yet apply
to every neighborhood in the city.
Looking toward July and August, it is not unusual for median sales
prices to fall during the summer due to seasonal factors related less
to changes in value than to inventory available to purchase and buyer
San Francisco House Values
San Francisco Condo Values
Median sales prices and average dollar per square foot values often
disguise an enormous disparity of values among the underlying
individual home sales in the data set, and how they apply to any
particular property is impossible to say without a specific
comparative market analysis (CMA). Please call or email if you’d like
a quick CMA performed on your home or one you’re considering
MEDIAN SALES PRICE is that price at which half the sales occurred for
more and half for less. It can be, and often is, affected by other
factors besides changes in market values, such as short-term or
seasonal changes in inventory or buying trends. The median sales price
for San Francisco homes (in all their almost infinite variety) is not
like the price for a share of stock (all the same), and short-term
fluctuations in median price are common and often meaningless.
Consistent, long-term trends are most meaningful.
AVERAGE DOLLAR PER SQUARE FOOT ($/sf) is based upon the home’s
interior living space and does not include garages, unfinished attics
and basements, rooms built without permit, lot size, or patios and
decks — though all these can still add value. These figures are
usually derived from appraisals or tax records, but are sometimes
unreliable or unreported altogether. All things being equal, a smaller
home will typically sell for a higher dollar per square foot value
than a larger one. Generally speaking, about 60-80% of listings report
square footage, and this statistic is calculated on these listings
The neighborhoods in the maps above were chosen because their volumes
of sales were considered sufficient to generate meaningful statistics.
We began with sales closing in March because they generally reflect
offers negotiated in early 2013, when market dynamics went through
another shift. When medians and averages are being calculated for a
wide variety of properties of different locations, sizes, eras of
construction, amenities and condition – as is almost always the case
in San Francisco – they can only be considered very general
approximations of value and changes in value.
Paragon Market Report, June 2013
New highs in home prices have not yet been reached in every San Francisco neighborhood, but the majority has either regained the value lost since the 2008 market meltdown, or now exceeded the previous high points of 2006-early 2008. (Different neighborhoods peaked at different times, just as they are now recovering at different speeds). This does not mean that every property bought at the height of the bubble in feverish multiple-offer bidding wars has now regained peak value. Nor does it mean that values might not fluctuate or drop in future months due to seasonal and/or other economic factors.
Though virtually every market in the country is now on a similar upward trajectory, San Francisco’s has recovered more quickly than most in the Bay Area, state and country. The city’s neighborhoods, with a few exceptions, were never hit as hard as most other areas by the tsunami of distressed property sales: our home values generally fell in the 15-25% range compared to huge declines of 40-60% elsewhere and so we have had less ground to recover. That said, the city has always been an exceptional real estate market and the confluence of economic factors both general (such as the lowest interest rates in history) and unique (such as the local, high-tech boom) jumpstarted and supercharged our recovery beyond most others.
It should be noted that, looking at past recoveries in the early eighties and mid-nineties, it is not unusual once a recovery gets underway after years of recession and repressed demand, for the market to regain previous peak values within a couple years of the turnaround beginning. Recoveries often start with a dramatic surge and that is what has happened with this one.
City, State & National Long-Term Overview
In this chart, one can see the recovery occurring everywhere, but most dramatically in San Francisco. For this analysis, we’ve calculated the 2013 SF median house sales price for the 5 months since the year began; if we looked at just the last 3 months (reflecting offers accepted in 2013, when the market accelerated further), the SF median house price jumps to about $1,000,000. (Note: State and national data sources are behind those we can access for the city, and the last median prices reflect that disparity.)
SF Houses: Previous Peak Values to Present
In this chart, since we’re also calculating average statistics, we’ve capped the sales price at $3,000,000 because ultra-high-end sales usually distort averages. We see the previous peak value in 2007 (for SF houses in general), the drop to the bottom of the market in 2011, and the rebound starting in 2012 and accelerating in 2013. By all 3 main statistical measures of value, San Francisco houses have met or exceeded previous peak values. To adjust for seasonality, the comparisons are for the spring months of each year.
This link goes to the same analysis for SF condos except it starts in 2008 when condo values peaked and sales are capped at $2m:
Condos: Previous Peak Values to Present
Short-Term Appreciation Trends
This chart breaks down the rise in SF home values occurring over the past 2.5 years. Though it appears that 2013 prices surged after the first quarter, the surge actually started in March, which is when the market really started to reflect offers negotiated in 2013. January and February sales mostly reflect the holiday season market, when the higher-end home market typically checks out. We prefer quarterly or longer time periods because they make for more reliable statistics: monthly statistics often fluctuate without great meaning. The high overall median prices achieved in March-May may drop somewhat during the summer due to seasonal and other factors.
This link goes to an overview of the past 30 years: it helps give context to what we’re experiencing today:
30 Years of SF Real Estate Cycles
2006-Present: House Values by Neighborhood
These 4 SF Realtor districts generate a lot of house sales, so they’re good for statistical analysis. For 2013, this chart looks at the last 5 months of sales-if assessing just the last 3 months, 2013 numbers would typically be higher. The central Noe-Eureka-Cole Valleys district, a hot bed of high-tech buyer demand, has soared well beyond its previous peak value in 2008. The very affluent northern district of Pacific Heights-Marina has also exceeded its previous peak. Sunset-Parkside in the southwest has regained its 2007 peak, and the southeast Bayview-Portola-Excelsior district, which was hit hardest by distressed sales, while recovering rapidly, has not yet made up the value lost since its 2006 peak. This district, with more house sales than any other, lost more percentage value in the downturn (25-45% depending on neighborhood) and so has more ground to make up. But it’s well on its way.
2006-Present: SF Condo Values by Neighborhood
These 6 areas of the city generate high numbers of condo sales, which is why we chose them for this analysis. Condos in all these areas have increased in value beyond their previous peaks in 2006-2008; some of them, such as South Beach, dramatically so.
This link illustrates how, over the past 5 years, the SF market has switched from being dominated by house sales to condo sales; with the continuing construction of large condo projects, we expect this trend to continue. TIC sales have dropped significantly, both as a percentage of sales and in actual unit sales: This is due to a number of complex issues such as changes in city condo conversion and tenant protection regulations.
Sales by Property Type
Price Range Dynamics
There are 3 main underlying currents occurring in San Francisco. First is the rapid dwindling of distressed property sales: Thus, sales under $500,000, the price range of most distressed sales, have dropped by 62% since last year. This segment is on the verge of disappearing completely in SF. Second is the dramatic resurgence in luxury home sales: the affluent have profited most from the economic recovery and the city also has large numbers of the newly affluent (often high-tech) who wish to buy homes. So, sales of homes costing $1,500,000 plus have surged by 76%. The third dynamic is simply the general appreciation of home values. All 3 factors add up to a large migration from lower-priced to higher-priced sales. Note: The medians quoted on this chart are for many different property types combined.
May Listings/Sales Snapshot
A clear indication of the red-hot heat of our market: 90% of SF home sales closing in May sold without going through any price reductions, at an average sales price 7% higher than the asking price and a very low average days-on-market of 29 days. These are very dramatic statistics illustrating the high demand/low supply situation here in the city.